What Growth Is Realistic To Expect Over Time?
Historical evidence shows that, if you get the right house, in the right location, at the right time, then growth can be very high.
To put an exact figure on just how much growth you can expect is difficult without a crystal ball. However, trends over the last 25 years show that median house prices across Australia have increased by over 400%.
Different areas do offer different growth percentages. The right location is always going to be the most rewarding (and I’ll be discussing indicators for choosing a location in more detail in my next article).
When I say the right location, this refers to the growth potential and the requirement of the tenants. The two really do go hand in hand.
Right House, Right Place, Right Time
To give you an example of how this can work, in August 2016 a client of ours purchased a two-bedroom villa off-the-plan in what has since become a very popular area. The location is a hub between two major capital cities, which offers many benefits to prospective tenants.
When you purchase off-the-plan, you buy at the current real estate prices. At the time our client bought, the value of the property was $425,000. She paid a 10% deposit, meaning that she put down just over $40,000.
Once the lands are registered and the construction's finished, everything changes. At that point, because there is structure and there are buildings, people are more interested in the area. At that point, the prices can really jump.
By September 2018 the property was valued at $523,000. Within a 24-month period, she had seen growth of close to $100,000! This equity meant that she was in a position to fund the deposit on her next investment property without needing to put her hand in her pocket again.
House prices in the area where she first bought had rocketed up. However, with the right advice, it was possible for her to find investment properties off-the-plan in alternative locations. By choosing locations that were still up-and-coming, we were able to find properties with a similar value to the one she first purchased.
This gave her the option of either paying a larger deposit on one property or splitting the money and putting a 10% deposit on two properties. As you can see from this, if the initial purchase is done right, you can quickly move up the ladder and begin to build an amazing property portfolio.
This is a great example of how growth can work for you. There are never any guarantees, but if you have a clear understanding of what to look for, then the growth you experience can be significant.
Even if you don’t see an extremely rapid jump in the value of your investment property, real estate always grows in value over time. There are peaks, corrections and periods of stabilisation in the housing price cycle, but the overall trend is always up.
What Is The Best Time To Buy?
There is a very simple answer to this question—as soon as you can.
The truth is that it is always a good time to invest in property. The longer you wait, the higher the property prices will be. Even if you buy at a time when the market is peaking, you can’t go wrong.
The reason for this is that, when property prices are high, fewer people are buying. People still need somewhere to live, though. This means that the rental market is flush with prospective tenants, giving you a far greater opportunity to secure great tenants for your property.
To your success,
Tony Myers
Australia’s Authority On Real Estate Investment For Busy Professionals